Are rational expectations irrational exuberance?
This phenomenon is one of the more pernicious byproducts of Western thought, underpinned as it is by the fiction of rationalism, which will be a recurring theme throughout this article. I hesitate to call it a secondary theme because the unwavering adherence to this central myth of Western civilization by the high priests and priestesses of high math and high finance (is it any wonder the products of their labors are so highly combustible) are—in this author’s humble opinion—at the root of our inability to properly understand our world and to cope with the unexpected. I am convinced the blind devotion of both theoreticians and practitioners to this ancient myth is the reason that most models are overly simplistic and that important data, variables, and relationships—the ones most capable of helping us make sense of our world and avoiding the worst kinds of disasters, even if they can’t steer us clear of all setbacks—are so often ignored in the conceptual frameworks underlying those mod
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